Biotech stocks fall after Trump vows to ‘bring down drug prices’

This Tuesday, Nov. 29, 2016 photo shows a display of prescription medicines for impotence and sexual problems at a doctor's office in San Diego. For many couples, doctors say soaring prices for the prescriptions have made sex unaffordable. The Nasdaq Biotechnology Index was down 3.5 percent at 10:44 a.m. in New York after President-elect Trump vowed to bring down drug prices.

Photo: Gregory Bull /Associated Press

President-elect Donald Trump, whose victory last month was greeted with a surge in pharmaceutical stocks, declared himself an opponent of high drug prices in an interview with Time magazine.

“I’m going to bring down drug prices. I don’t like what’s happened with drug prices,” Trump said, according to a transcript of the interview posted on Time’s website.

Over the past 18 months, companies including EpiPen allergy shot maker Mylan NV and Valeant Pharmaceuticals International Inc. have borne the brunt of public outrage over drug costs. Last week, the chief executives of Regeneron Pharmaceuticals Inc. and Pfizer Inc. sparred over the reasons their industry’s reputation has suffered, including the role that prices have played.

Trump has been cited as a boon to free-market health care, but drug company executives and industry observers have already said that he may scrutinize their prices as a populist issue. Allergan Plc Chief Executive Officer Brent Saunders said at an investor conference last week that Trump could end up being more “vicious” on pricing than defeated Democratic presidential candidate Hillary Clinton, and that he worried his industry has a “false sense of relief” after Trump’s victory.

Saunders, in a tweet responding to Trump’s comments, wrote, “Imagine if he used Twitter and went after an actual drug price increase? Industry can fix with self-regulation?” Saunders has pledged to hold down increases at Allergan.

A request for comment from Trump’s transition team wasn’t immediately returned.

Since winning the election Trump has singled out individual companies for criticism, calling on Carrier Corp. and Ford Motor Co. to keep jobs in the U.S., and Boeing Co. to reduce the cost of a new Air Force One presidential jet.

While Trump didn’t make drug costs a major focus during the campaign, he has backed allowing consumers to re-import drugs from abroad, and mentioned having the Medicare health program for the elderly negotiate prices directly with pharmaceutical manufacturers. Both ideas have long been opposed by the industry and many Republicans — including Representative Tom Price, the Georgia congressman he has tapped to lead the Department of Health and Human Services.

Yet it could also be an area of common ground in Washington, depending on whether Trump takes up the banner for voters upset over pricing. An October pre-election survey by the Kaiser Family Foundation found that drug costs were the top health care issue for the next president. Senator John McCain, an Arizona Republican, has proposed requiring drugmakers to report any price increase of more than 10 percent. Representative Elijah Cummings, a Democrat from Maryland, has led his party’s charge against high drug prices.

Some drug CEOs have recently come out to say they’re not aggressive price-takers. Merck & Co. CEO Ken Frazier said in an interview last week that his company has been restrained in raising the costs of its medicines. Saunders has already sought to distinguish his company from its peers with a pricing pledge that limits increases. Novo Nordisk A/S CEO Lars Rebien Sorsen said recently his company will cap increases.

Setting the cost of a drug is a murky process in the U.S. List prices are set by drugmakers, rebates are privately negotiated with intermediaries and the out-of-pocket cost customers pay at the pharmacy varies is based on whether or not they have insurance, and how good it is.

The U.S. doesn’t directly regulate medicine prices, unlike much of the rest of the globe. On Wednesday, Pfizer Inc. and Flynn Pharma Ltd. were fined a record amount for abusing a dominant position in the U.K. after they increased prices by 2,600 percent.